How Fintech is Changing Small Business Financing

With the rise of technology, every industry is reaping its benefits and finance is no exception. Every other day, new and convenient fintech solutions or financial technology solutions are coming up in the market to make the lives of people a little easier in terms of making payments. From carrying loads of cash to carrying just your smartphone to make cashless transactions, humankind has come a long way. And why are individuals, even businesses, getting the benefits of fintech solutions now more than ever? 

Compared to traditional banking systems which can be restrictive, slow and complicated, there are various innovative fintech platforms and solutions which are customer-friendly and accessible which have changed the landscape of small business financing. Here’s how fintech paved its way into small businesses. 

What Does the Fintech Landscape Look Like in India?

The kind of support ecosystem that India offers to budding founders, it cannot be denied that the country is a hotspot for many successful startups. The different types of fintech found in the sub-continent are as follows:

Payments

Thanks to buy-now-pay-later systems, UPIs and digital systems, fintech has improved the payment processes. Unlike traditional banking systems, fintech ensures that people can make faster payments which is convenient for both customers and small businesses. 

Banking and Lending

The demands that small businesses have today are difficult to fulfil by traditional banking processes despite being robust. It is not possible for today’s founder to manually conduct the payroll or different vendor payments. This is where fintech solutions come in, where the small business owner automates the payment process and this way, they don’t have always to keep a tab on the payroll. 

Investing and Management of Wealth

Fintech solutions ensure accessibility, including investors. There are fintech which help investors manage their wealth and invest in companies which would help them grow financially. 

Insurance 

Fintech has made the insurance business sleek and personalised, which was a complicated phenomenon back in the day. Furthermore, there are various fintech solutions that make corporate insurance approachable. 

Regtech

Startups must meet certain regulatory compliances. This makes them authentic and trustworthy. It is, for this reason, a new category of fintech has come up known as reg tech. Regtechs are basically software that supports small businesses with accounting, taxation or legal compliances. 

How Fintechs Help Small Businesses?

Here are a few ways through which fintech is making a positive difference in the finances of small businesses. 

By automating processes

MNCs and big businesses have gigantic financial teams that run all financial operations: starting from executing payrolls to managing regulatory compliances and vendor payments. But what happens to small businesses? 

Mostly, small businesses have a team of two or three people who carry out all the financial operations. Since only a few people are working on all the business's financial processes, the risk of human errors is inevitable. Simply put, finance management was a daunting task for startup founders. It is for this reason small business owners have automated financial management. Here’s how automation has helped SMEs (small and medium-sized enterprises). 

• With automated tax calculations and payments, SMEs can now avoid missing deadlines and paying hefty penalties. 
• SMEs use accounting software that provides bank account integrations so that the transactions are automatically recorded in their account books. 
• The automation of vendor payments, payroll and customer payouts saves startup founders time from spending endless hours making hundreds of payments. 

By offering seamless credit access

Running small businesses requires capital. It is the most basic thing. However, before fintech appeared, traditional banks were sceptical about lending money to startup owners. The reason is that despite the fact that SMEs are fast-growing, there is always the risk of startups failing and going bankrupt. 

It was when fintech came that offered loans and credit to determined entrepreneurs. These fintech provided endless benefits: no collateral, flexible terms and reduced interest rates. 

By Optimising Payments

Gradually, most businesses have decided to become operational through online mode. A decade ago, if you had to buy a pair of socks, you had to visit the local hosiery store. But now you can simply log into Amazon and enjoy doorstep delivery. Since more people are becoming comfortable with online shopping, SMEs have had to find ways to streamline their payment processes and fintech is the way to do it. With fintech, small businesses can now accept online payments, thus gaining more reach and visibility. 

By Saving Money

Saving money is important when running small businesses, which is why fintech solutions come in the way. Entrepreneurs save money by not spending time, money and resources on manual activities. They also save money by avoiding paying penalties due to late tax payments. With such cost-cutting, they basically invest in the growth of their startups. 

Conclusion

With fintech solutions, small businesses can have a safety cushion when it comes to offering seamless payments, managing vendors, or paying taxes without any default. One of the most convenient fintech solutions is the payment tag by Neofinity. Customers can simply integrate the tag on their smartphone and tap it to make payments.